Home Loan Processing Fees (2023-24)
The home loan processing fee is the charge borne by you, the borrower, towards the lender once your home loan application has been accepted. The processing charges for home loans occur only once. Make sure to calculate the cost of your home loan by taking the processing fees into consideration. Compare lenders and choose a home loan with the lowest processing fee.
Home Loan Processing Fees
While some lenders charge a processing fee for home loans, some do not. Usually, the processing fees start with 0.5% of the loan amount and goes Up to 7% in some cases. Bajaj Finserv offers competitive home loan interest rates along with low processing fees. When it comes to home loan interest rates, you should always compare and work out your monthly repayment using a housing loan EMI calculator.
Below is the table for home loan processing fees and other charges.
TYPE OF FEES
Up to 7% of the loan amount
Up to Rs. 9,999 (One time)
Types of other home loan charges and fees
Apart from processing fees, lenders levy other charges too. They include the following.
1. Fees on account of external opinion: Lenders conduct a technical and legal assessment of the property while processing a home loan application. The lending institution charges a flat fee in this case, which the borrower is required to pay. These fees are directly payable to the advocate or technical valuer based on the nature of assistance.
Such fees may vary based on account of external opinion and are usually higher for high-value properties. This process serves two purposes:
- Through a technical assessment, the lending institution understands if the property is worth the value the borrower is seeking
- Legal assessment allows lenders to know if the property is free from any encumbrance or legal complications
2. Property insurance: Opting for a home insurance cover is crucial for every borrower taking a housing loan. Usually, the cost of insurance varies between 0.1-2% of the value of a property. Here’s an example: Say a borrower has opted for a home loan to purchase a property worth Rs. 40 lakh and the rate of premium is 0.1% - then a premium of Rs. 4,000 needs to be paid.
Property insurance premiums can be paid as a lump-sum amount when the loan application is approved. It can also be paid in the form of yearly payments. Usually, lending institutions offer the ease of one-time property insurance, with the premium included as a part of the loan amount.
3. Charges on account of delayed payments: Lending institutions require borrowers to pay an additional charge if they fail to pay the EMI as per the repayment schedule. This delayed payment charge is usually levied on the overdue loan amount.
Delayed payment charges for home loans can be as high as Up to 2% of the outstanding loan amount and is charged every time the home loan EMI payment is missed. Although the charges due to delayed payment may seem insignificant compared to the home loan quantum, there is a downside to this scenario. All delayed payments and resulting late payment charges are reported to the credit bureau. Thus, it can adversely affect your CIBIL score, thereby making it harder to avail of credit in future.
4. Incidental charges: Lending institutions require borrowers to pay an additional charge that acts as a cover in case of any default. These incidental charges include all expenses that arise during the process of recovering dues from the defaulting borrower. Often called recovery charges or collection charges, this is levied by the lender if a borrower fails to pay the EMI and their loan account goes into default. In such cases, the lender may have to take action against the concerned individual. Incidental charges are supposed to cover this and depend on the actual expense of the process.
5. Statutory or regulatory charges: Financial institutions extending housing loan products require borrowers to bear the cost of certain statutory and regulatory fees. All applicable home loan charges on the following are to be borne by the borrower.
- Stamp Duty
Stamp Duty is the tax payable on property documents and is applied during the sale or purchase of a property.
Maintenance on Demand or MOD is a kind of charge a borrower pays to confirm the property as loan collateral. MOD charges generally account for 0.1% to 0.5% of the loan amount.
Memorandum of Entry is where one enters into a declaration with the bank that one has handed over the original set of documents of their property for mortgaging the same as a loan security.
Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) charges: CERSAI charges are fixed, ranging from Rs. 50 for a loan up to Rs. 5 lakh to Rs. 100 for loans above Rs. 5 lakh.
Charges applicable on account of any other statutory or regulatory body along with the applicable taxes must be paid (or refunded, depending on the case at hand) only by the borrower.
Home Loan Processing Fee FAQs
Home loan processing fees are not refundable. These are one-time payments and are a part of the loan application process. The home loan processing fee, however, is not fixed. It varies and depends on several factors, such as the type and amount of loan, and creditworthiness as well as the past repayment behavior of the borrower.
Your processing fee is calculated as a percentage of the total amount. The processing fees may also differ based on your employment type.
Lending institutions usually require borrowers to pay incidental charges to cover the recovery expenses in case they fail to pay EMIs on time. Under such circumstances, the borrower’s account may go into default, prompting the lender to take action and recover the outstanding loan amount. Incidental charges cover the actual expenses borne during this recovery process.
MOD (Margin Over Base Rate) charges are a component of the interest rate on home loans in India. The base rate is the minimum interest rate set by the Reserve Bank of India (RBI), below which banks cannot lend. The margin is the additional interest rate charged by the bank on top of the base rate to cover its costs and make a profit.
MOD charges are applicable to floating-rate home loans in India. The interest rate on these loans is linked to the bank's base rate, which is subject to change based on various factors such as inflation, economic conditions, and RBI's monetary policy. When the base rate changes, the interest rate on the home loan also changes, and the borrower's EMI is adjusted accordingly.
It is important to note that MOD charges are not a one-time fee but a recurring charge that can increase the overall cost of the home loan. The frequency and amount of MOD charges may vary from bank to bank and depend on the borrower's creditworthiness, loan amount, and loan tenure.